Instalment tax for Kenyan sole proprietors
When a Kenyan sole proprietor or side-business owner must pay instalment tax, the KRA threshold, the four calendar-year dates and how to plan for them.
By Achekam · · 4 min read · For Running a business businesses in Kenya
If you trade in your own name, as a sole proprietor or under a registered business name, there is no company standing between you and the taxman. The salon's profit, the consultancy's fees and the hardware shop's margin are your income, and the income tax on them is your personal bill.
Instalment tax is how KRA collects much of that bill while the year is still running. Plenty of individual traders assume it is a company matter and find out otherwise when they file the annual return. This article covers the KRA threshold for individuals, who is left out, the four dates and how to budget for them.
The test KRA applies to individuals
KRA's instalment tax guidance says the tax is payable by every person subject to tax, with turnover tax payers excluded, and that individuals pay it where their tax liability not covered by PAYE is over Kshs 40,000 for the year.
Notice what the threshold measures. It is not your turnover and not your profit. It is the tax on your income that PAYE does not already collect. To apply it, estimate the profit your business will make this year, add any other income that is not taxed through a payroll, work out the income tax on that, and compare the result with Kshs 40,000.
A worked example in words: a nurse employed by a hospital also runs a small catering business at weekends. PAYE takes care of the hospital salary. The catering profit is the part that counts, and if the tax on it is expected to exceed the threshold, she pays instalment tax on it during the year.
Who is left out
KRA lists three groups who do not need to pay instalment tax:
- individuals whose only income is employment income taxed under PAYE;
- individuals whose tax from other income is below Kshs 40,000 a year; and
- turnover tax payers.
The turnover tax exclusion is worth a second look. A small trader in that regime pays turnover tax under its own return instead, so instalment tax does not arise. If you are not sure which regime you fall under, the taxes a Kenyan sole proprietor pays sets the options out.
The change for employment-only income from July 2026
The Finance Act 2026 adds an express exemption: from 1 July 2026, individuals with employment income only are exempt from instalment tax. For an employee with nothing but a salary, this puts in law what KRA's guidance already said. For anyone with a trade, rental income or fees on the side, nothing changes, because that income is not employment income. Employees with a side business should read filing a return with side income.
Four dates in the calendar year
In Kenya the individual tax year is the calendar year. KRA says instalment tax is paid in four instalments of 25% by the 20th day of the 4th, 6th, 9th and 12th months of the year of income. For a sole proprietor that means:
| Instalment | Due by |
|---|---|
| First | 20 April |
| Second | 20 June |
| Third | 20 September |
| Fourth | 20 December |
Farmers are treated differently. KRA says taxpayers in the agricultural sector pay 75% in the 9th month and 25% in the 12th month, so a farmer trading in his own name pays by 20 September and 20 December, which suits income that arrives with the harvest.
Working out each payment
Kenya's rules base instalment tax on the lower of two figures: 110% of the previous year's tax, or an estimate of the current year's tax. KRA's instalment tax page explains both methods.
In words, the routine looks like this. Take last year's tax on your non-PAYE income and add a tenth. Separately, estimate this year's tax from how the business is actually trading. Use the lower of the two, and pay a quarter of it on each of the four dates. If the year turns sharply worse after the first instalment, a fresh estimate may lower the later payments; write down how you reached it, because you may be asked to explain it.
The balance between what you paid in instalments and the final tax for the year is settled with the annual return.
What Achekam computes once its rules are approved
Once its Kenyan rules are approved, Achekam computes instalment tax among its Kenyan tax computations, alongside corporation tax, VAT, withholding tax, turnover tax, capital gains tax and stamp duty.
Two limits shape how a sole proprietor uses this. First, Kenyan rules whose start date the research did not establish begin on 1 January 2026 in Achekam, so earlier periods are refused rather than computed; work out older years elsewhere. Second, the figures the calculation starts from, such as last year's tax, come from your income tax computation, so have your accountant confirm them before you rely on the result.
When you pay, Achekam records the payment with KRA's own Payment Registration Number and receipt. It never generates a payment reference itself, refuses Kenya's discontinued paybill 572572, and needs a second person to confirm the payment.
Planning the payments
Instalment tax hurts most when it arrives as a surprise. A few habits take the sting out:
- Put the four dates in your calendar at the start of each year.
- Move a share of each month's takings into a separate account kept for tax.
- Revisit your estimate after the June instalment, when half the year's trading is known.
- Generate the payment slip on iTax and pay against its PRN.
- Keep every payment receipt with the year's tax papers.
KRA's instalment tax page sets out who pays, the prior-year and current-year methods and the four due dates. Rates and thresholds change, so check it each year before your first instalment. Companies follow the same four-payment pattern on their own financial year, covered in paying Kenyan instalment tax on time.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
